Court gives gig companies big win
A California appeals court ruled Monday that Proposition 22, which classifies gig delivery drivers as independent contractors rather than employees, could stand as state law.
The decision, which overturns a 2021 Alameda Superior Court ruling that deemed the measure “unconstitutional and unenforceable,” is a significant win for California's rideshare and food delivery industry and a setback for its opponents in organized labor.
“Today's ruling is a historic victory for the nearly 1.4 million drivers who rely on the independence and flexibility of app-based work to earn income, and for the integrity of California's initiative system,” wrote the business-backed Protect App-Based Drivers and Services coalition in a statement.
The appeals court does not have the last word. Opponents of the measure will almost certainly ask the California Supreme Court to hear the matter.
Monday's ruling adds yet another chapter to the years-long battle over worker classification in California.
The saga began with the passage of Assembly Bill 5 in 2019, which broadly redefined which workers qualified as employees and who could be hired as independent contractors. Gig companies lobbied hard against the bill and responded to its passage with Prop. 22.
Voters approved the initiative in November 2020 after businesses like Uber and Lyft poured more than $200 million, a record-setting amount, into the campaign and threatened to cut services in the state. The measure exempted appbased gig workers, such as drivers for DoorDash and InstaCart, from state laws that required businesses to hire more workers as employees rather than independent contractors.
The following year, workers supported by the Service Employees International Union (SEIU) sued the state twice once in the Supreme Court and once in Alameda County Superior Court on grounds that the proposition unconstitutionally prevented the state from overseeing the worker's compensation system.
Rideshare drivers, backed by SEIU, sued the state in early 2021 arguing that the initiative violated the state constitution by infringing on the Legislature's authority to enact a worker's compensation program and by requiring a majority to amend the law — a nearly impossible threshold to achieve. An Alameda County Superior Court judge agreed with the workers and ruled in August 2021 that the law was unenforceable and unconstitutional.
The appellate justices Monday determined that Prop. 22 did not violate the California Legislature' power over workers' compensation, nor did it violate the “single-subject” rule that limits the scope of ballot initiatives to one single issue.
The ruling did overturn the majority requirement for any legislation that would allow gig workers to unionize. The court said the language violated separation of powers principles.
“They're not going to stop the fight,” said Tia Orr, leader of SEIU California,
which has been supporting the drivers who sued the state. “They are a group of fearless workers that I don't believe are going to bow down with any defeat, even partially, in this fight demanding a fair workplace.”
Orr said workers will ultimately decide where the case goes next.
“State level courts are generally reluctant to weigh in, on ballot measures,” said David McCuan, a Sonoma State professor and expert on direct democracy. “It's almost like they are reluctant to suffer the wrath of voters.”
McCuan said the fact that the court upheld any portion of the lower court's ruling was “huge” given the courts' history of not refereeing ballot measures. He also noted the unions' efforts to reverse Prop 22 after the fact marked a change in strategy for opponents of propositions.
“The aftermath of (Prop) 22 is an attack on ballot measures based upon a their constitutionality not just how they got on the ballot, but what they do,” McCuan said. “This battle is not over.”